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LNG can be sourced from anywhere – ESET

July 7, 2016 Webmaster

BY AVIA COLLINDER Business reporter collindera@jamaicaobserver.com

LNG is coming to Jamaica

New Fortress Energy, the company which has won the contract to supply the island’s sole power distributor the Jamaica Public Service Company (JPS) with LNG for substations in Bogue, Montego Bay and another to be developed in Old Harbour, St Catherine, said it buys supplies from sources worldwide.

The company has declined to comment whether its suppliers include Trafigura Beheer, from which the Jamaica Observer understands it has sought to make buys.

Meanwhile, the Electricity Sector Enterprise Team (ESET) has indicated to theBusiness Observer that it does not matter where in the world the gas comes from.

Trafigura is the world’s third-largest private oil and metals trader. That company is also seeking to grow its market for LNG supply globally.

However, in 2011 the Dutch company was involved in controversy for a $31-million political donation to the the People’s National Party administration, which was then the governing party.

The company continues to sell supplies through third-party deals to the local market, including spot purchases made by Petrojam.

Describing the surge in LNG demand as an “LNG revolution”, Trafigura says on its wesbite that it plans to double supplies sold year over year from base year 2013 when the company transported one metric tonne (mt) of LNG globally.

The company has three full-time traders based in Geneva supported by its US Natural Gas team in Houston, Texas, and a European Natural Gas team, working with 27 LNG regional offices in key export and import countries across the globe.

However, as to sales programmed for Jamaica, the company said it has no comment.

“We don’t comment on our day-to-day commercial arrangements,” Victoria Dix, media liaison for Trafigura said when asked to channel questions about the Caribbean market, including Jamaica.

Bloomberg describes Trafigura Beheer as the world’s current largest LNG trader, reporting at year end December 2015 that the commodity trader “boosted the amount of LNG handled to 4.2 million metric tonnes in the financial year ended September 30, from 1.7 million a year earlier following a doubling in volumes… that made it the world’s biggest independent LNG trader.”

A source close to New Fortress Energy told the Business Observer that it is normal for ships to swap cargo and there may have been spot purchases, but that there is, however, no long-term relationship with Trafigura.

More directly, the company, through a spokesperson, said it sources LNG from all over the world.

“In addition to supplying our own gas from the United States, New Fortress Energy sources gas from all over the world. As a matter of policy, we cannot comment further,” New Fortress said.

He stated that in relation to Bogue, “we’re making significant progress and are excited to provide natural gas to help further Jamaica’s clean energy transition. We’re in close coordination with JPS on the process and timeline”.

Chairman of ESET Dr Vincent Lawrence told the Business Observer on Monday that the source of LNG was immaterial.

“ESET is not aware of any trades, swaps or short-term source arrangements that New Fortress Energy may make in satisfying its contractual arrangements with JPS.

“NFE under its Gas Supply Agreement arrangements can supply gas from any origin. However, in ESET granting approval of the Gas Supply Agreement between JPS and NFE, in order to ensure security of supply, NFE had to demonstrate as to its long-term ownership of and access to gas from the United States including the ability to obtain any required export permits.”

Lawrence added, “The contractual arrangements are private and between two private companies,” further adding that “the GOJ is not a party to the contractual nor day to day delivery arrangements”.

The island is moving towards the majority use of LNG as fuel for energy, with the aim of reducing dependence on oil which is subject to price volatility.

To that end, JPS has retrofitted its 115MW gas turbine plant in Montego Bay from automotive diesel oil to dual fuel use. The conversion, it was projected, will result in an approximate 40 per cent fuel price reduction.

New Fortress has also secured the supply contract for the JPS’s planned 195MW plant in Old Harbour which is being razed and will be rebuilt and expanded.

Start-up of LNG use at the JPS Bogue plant is due to begin in August, when construction of fuel lines and storage facilities are expected to be completed.

New Fortress is also slated to construct an expandable 100MW, natural, gas-fired, cogeneration plant for alumina producer, Jamalco, replacing a previous plan for a coal-fired alternative

The Observer

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JPS Unfazed By LNG Shipper’s Losses

July 1, 2016 Webmaster

Tomblin

The Jamaica Public Service Company (JPS), managers of the national electricity grid expects Golar LNG to ship liquefied natural gas to Jamaica, despite its heavy losses.

Golar is contracted to New Fortress Energy (NFE), the latter being JPS’s selected partner to develop and supply natural gas to the Jamaican utility. New Fortress is five months behind schedule with deliveries.

JPS President and Chief Executive Officer Kelly Tomblin said that even in the worst-case scenario, the power utility remains protected.

“Golar is a public company with a market cap of about US$1.5 billion and a balance sheet with over US$4 billion of assets. It’s been in business since 1946 and is widely followed by investors all over the world,” said Tomblin in a response to Gleaner queries.

“New Fortress Energy has indicated to me that they have been a dependable and reliable partner in preparing to deliver gas to Jamaica. JPS is protected contractually if New Fortress fails to bring gas, as required in the gas supply agreement.”

NFE earlier this year contracted Golar for two years to ship LNG to Jamaica. The first shipments will feed JPS’s plant at Bogue in Montego Bay, which has already been retrofitted to burn gas as well as diesel oil.

In early June, NFE acknowledged Gleaner queries regarding the implications of Golar’s finances, but did not follow through with a response.

NET LOSSES

Golar reported net losses of US$80 million for its first quarter ending March. The loss was mainly because of its US$61.5 million in operating expenses, towering over its US$18.6 million in revenues for the period. Over 12 months, Golar posted a US$197.6-million net loss for financial year 2015 and US$43 million in net losses for 2014.

Last month, CEO Gary Smith resigned, and its former CEO, Oscar Spieler, retook control of the company amid restructuring of the operations.

Tomblin expects the LNG projects at Bogue and, later, at Old Harbour, along with additional capacity from renewable plants, to reduce the power utility’s reliance on heavy oil from 95 per cent to 50 per cent in the medium term.

steven.jackson@gleanerjm.com

The Gleaner

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Tax Changes For Heavy Fuel Oil Had Minimal Impact On Electricity Bill Increase – Shaw

June 17, 2016 Webmaster

Shaw File

Reacting to concerns that the raising of taxes on fuel has resulted in the spike in electricity bills consumers will face this month, Finance Minister Audley Shaw is arguing that the increase in special consumption tax (SCT) on heavy fuel oil (HFO) is only a nominal percentage of the rate increase the Jamaica Public Service Company (JPS) announced last week.

In response to questions from The Gleaner, the minister said that of the 12.8 per cent increase the JPS intends to apply, the increase in the SCT on HFO “translates to a mere 2.3 percentage points” or 18 per cent.

“As estimated in the tax measures, the effect of the increase in the overall SCT (specific and ad valorem) on HFO and LNG is approximately J$1.35 billion (or approximately US$11 million) in fuel costs to JPS. This would then approximate to a cost of US0.36 cents per kWh,” the minister said.

“Given the US two-cent-per kWh increase by JPS to consumers and the impact of the increased SCT of US0.36 cents per kwH to JPS costs, the percentage contribution of the tax to the pending JPS electricity bill increase would be 18 per cent. Therefore, the increase in SCT on HFO translates to a mere 2.3 percentage points of the 12.8 per cent electricity bill increase.”

Additionally, Shaw said he at no point stated that the increase would not affect the rates of the JPS as no one specifically asked him about the SCT on HFO.

“With reference to the comments by the minister of finance and the public service at the post-Budget press conference, it should be noted that the minister spoke to a question posed on the impact of the J$7.0 increase in SCT on fuel used for the purposes of ground transportation,” the statement read.

“The minister’s comments were not geared towards the impact of LNG or HFO on electricity prices. There were no questions posed about the effect of the increase in the overall SCT (specific and ad-valorem) of HFO.”

The increase in SCT on HFO that was announced during Shaw’s May 12 Budget presentation was one of three reasons Jamaica’s only power distribution company attributed to this month’s increase.

During his post-Budget press conference on May 13, Shaw, in responding to concerns that the new tax measures would affect light bills, said: “The argument also is that JPS light bills will go up as a result. And I want to remind everyone that this tax (on fuel) does not apply to Jamaica Public Service at all. It is only related to SCT for fuel for road transport only.”

anastasia.cunningham@gleanerjm.com

The Gleaner

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Light bills to go up this month

June 14, 2016 Webmaster

JAMAICA Public Service (JPS) customers will be asked to pay more for their electricity this month — partly due to the recent increase in the Special Consumption tax (SCT) on heavy fuel oil (HFO), the light and power company advised yesterday.

The company said the spike is also due to an increase in the cost of the fuel used for electricity generation, caused by rising oil prices on the international market, and the continued devaluation of the Jamaican dollar.

“This is definitely not the best news for us at JPS, or for our customers,” JPS President and CEO Kelly Tomblin said in a release.

The Government last month introduced the $7 per litre increase as part of the revenue package to help finance its $580-billion 2015/16 Budget, but Finance Minister Audley Shaw, at the time, assured the panicking public that the tax would only apply to fuel at the pumps.

“This tax doesn’t apply to JPS at all. It is only related to SCT for fuel for road transport,” Shaw said at a post-budget press conference. The SCT is expected to yield $6.4 billion for the Government’s coffers.

In announcing the 12.8 per cent increase yesterday, the JPS urged consumers to “conserve on their electricity usage, as the upward trend in oil prices has resulted in an increase in the cost of electricity”.

“The overall increase will result in residential customers paying US$0.21 per kWh on average for electricity in June, compared to US$0.19 in May. This means that the average residential customer using 165kWh of electricity for the month, will see a $500 increase in his or her June bill, which will move from $3,875 in May to approximately $4,372 this month,” the JPS said.

The JPS president stressed that, despite the increase, electricity bills are still 20 per cent lower than they were in June 2015 when customers were paying US0.27 per kWh. The company argued that Jamaica continues to enjoy one of the lowest electricity rates in the region, behind Belize and Trinidad.

Reacting to the news, Private Sector Organisation of Jamaica (PSOJ) President William Mahfood reiterated that the sector had recognised from the outset that the imposition of the tax on the HFO and Liquefied Natural Gas (LNG) would have an incremental increase in the cost of electricity of five per cent.

“As far as the price of oil goes, this is a matter that is beyond our control (but) we still feel there should be some amount of hedge put in place to mitigate against future increases in the price of oil,” he remarked, noting that the sector is in full support of the phasing out of older power plants which rely on HFO and diesel.

He said that, while the phasing out of JPS’ 190-megawatt facility at Old Harbour will take a couple more years, eventually more plants will convert to LNG.

Mahfood said also that, like rising oil prices, the devaluation of the dollar against the US currency is out of Jamaica’s hands and can only be militated against by economic growth.

The Observer

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LNG Shipper Under Financial Pressure

June 3, 2016 Webmaster

Golar LNG, the company which secured a two-year contract to ship liquefied natural gas (LNG) to Jamaica, posted huge net losses, has a working capital deficit and its chief executive officer resigned last month.

The shipping company continues to suffer from a slowdown of the LNG industry during a global oil price drop, symptomised by almost US$700 million of negative working capital.

The Jamaica contract is a bright spot for the company amid declining revenue.

“Partially mitigating the loss of this income was revenue earned by the Golar Arctic which commenced its two-year FSU service with New Fortress Energy, offshore Jamaica,” said Golar in financial results issued this week.

Golar also aims to refinance debt and launch new growth initiatives to adapt to the soft global LNG market.

New Fortress, an American company, is contracted by Jamaica Public Service Company to supply LNG to its Bogue plant. The pipeline and terminal have been developed but delivery of the gas, which should have started in April, has been pushed back to August.

On Wednesday, New Fortress promised responses on the implications of Golar’s finances for its contract, but had not followed through up to press time.

Golar reported net losses of US$80 million for its first quarter ending March. The loss was mainly due to its US$61.5 million in operating expenses towering over its US$18.6 million in revenues for the period.

Adjusted for exceptional items, losses would only have amounted to US$41.2 million.

Fundamentally, its revenue gap has defined the accounts since at least 2014. Consequently, Golar posted a US$197.6-million net loss for financial year 2015 and US$43 million in net losses for 2014.

Last month, CEO Gary Smith resigned and its former CEO, Oscar Spieler, retook control of the company. Golar cited restructuring as a necessary move to adapt to the new LNG reality, and the reason for the resignation.

Spieler, a naval architect, previously served as CEO of Golar between July 2009 and June 2011. He has a “successful track record of delivering complex offshore and shipping-related projects,” stated the financials. A release from the company indicated that both men previously traded the CEO position. Smith, who was promoted to CEO in January 2015, previously served as Golar CEO between March 2006 and July 2009.

Amid these changes, the company’s current assets

of US$530 million were overpowered by current liabilities of US$1.23 billion as at March 2016, resulting in negative working capital of US$670 million.

Burning through cash

Additionally, Golar has been burning though its cash holdings, which dropped from US$376 million to US$93 million in the space of one year.

The company still holds a strong US$1.8 billion in equity, but it fell from US$2.2 billion a year earlier.

Golar explained that the fast-growing LNG industry is going through a “rapid transformation” where monetisation of stranded gas, lowering the cost of LNG production and the opening of new markets are all critical success factors.

“An anticipated delinking of LNG prices from oil prices will also create additional demand for LNG. The traditional approach to executing LNG projects favoured by many oil majors may not cost effectively meet this new demand,” the company said.

Natural gas prices are reportedly at seven-year lows. The commodity is currently trading around US$2.40 per 1,000 cubic feet in the US.

At the same time, however, oil continues to trade below US$50 per barrel, which is still less than half the price crude was trading at two years ago.

The Gleaner

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OUR Won’t Allow Bogue Delay To Lead To Higher Light Bills

May 20, 2016 Webmaster

The Office of Utilities Regulation (OUR) says it will ensure that power utility Jamaica Public Service Company does not increase bills to consumers based on the delay in the delivery of cheaper gas fuel.

The first delivery of liquefied natural gas – LNG – by JPS’ supplier was expected in April, but has been pushed back to August.

New Fortress Energy has developed a terminal in Montego Bay to feed gas to JPS’ Bogue plant, which has been converted to burn either LNG or automotive diesel oil.

“The OUR has moved to assure consumers that it will be vigilant in ensuring that the delay in the delivery of liquefied natural gas to the Bogue power plant will not result in an increase in the price of electricity,” said the regulator in a statement.

While welcoming the completion of the conversion of the 120-megawatt combined cycle plant, the OUR signalled disappointment with the “four-month delay” in the delivery of the overall project.

The gas supply agreement signed by JPS and New Fortress Energy on August 5, 2015, stipulated that gas delivery would commence April 2016, the OUR stated.

“Safeguards for customers were included in the agreement with New Fortress to ensure that any delay on its part would not result in negative cost implications for customers,” noted OUR Director General Albert Gordon. “The OUR has been monitoring the project closely and will continue to keep the public abreast of its progress.”

Project’s goal

The Bogue project’s goals, which are aligned to those in the National Energy Policy, were to reduce fuel cost, and lower the operations and maintenance expenditure of electricity generation. Gordon noted that the OUR’s involvement in the project began in 2008 and that the agency mandated that the plant be upgraded to burn gas in the 2014-2019 JPS tariff determination.

“To ensure this, the OUR also made provisions for the setting up of the Bogue Plant Reconfiguration Fund (BPRF), financed through the tariff, to facilitate the conversion cost,” the agency said.

The revenues for the BPRF – which totalled $15 million – were collected by the JPS through a line item in the monthly fuel rate calculation on customers’ bills, over a twelve-month period, between February 2015 and January 2016, the OUR said.

Requests to JPS for comment were unanswered up to press time.

The Gleaner

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Paulwell Says Fuel Tax Will Impact Consumers Negatively

May 13, 2016 Webmaster

Former Energy Minister Phillip Paulwell says consumers who have been benefiting from reduced electricity rates from the Jamaica Public Service (JPS) over the last 12 months could see a hike in the cost of energy with the Government’s imposition of new taxes on heavy fuel oil and liquefied natural gas.

The JPS recently concluded work to convert its Bogue Power Plant in Montego Bay, St James, to dual-fuel capability.

United States-based New Fortress Energy is expected to bring liquefied natural gas into the island by August, at which point the newly converted Bogue power plant will begin to use the more environmentally friendly fuel.

Paulwell’s concerns came as he spoke with journalists yesterday at the end of Shaw’s opening contribution to the Budget Debate.

“Currently, the JPS does not pay taxes on heavy fuel oil. Government has now imposed a tax both on liquefied natural gas, which will arrive in August of this year, and on heavy fuel oil, so it means a significant increase in the price of electricity that has been trending down by almost 50 per cent over the last year.”

At the same time, Opposition Leader Portia Simpson Miller is taking the Government to task for “breaking its promise” by imposing new taxes to fund the tax-relief plan.

“All I can say is that they have broken their promise to the Jamaican people – no new tax – but, from all indication of what Minister Shaw said today (yesterday), it is the poor that will suffer,” she said.

Central Manchester MP Peter Bunting argued that the increased taxes would affect everyone, but have a more significant effect on those who earn under $600,000 per annum, and who will have to face increased transport and electricity costs.

He described the tax measures as regressive, noting that persons at the bottom of the society are being burdened to give relief to those earning at a higher level.

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Bogue Power Plant ready to use natural gas

May 11, 2016 Webmaster

The Jamaica Public Service Company Ltd (JPS) has officially concluded work to convert the Bogue Power Plant in Montego Bay, St James, to dual fuel capability.

The plant is now able to use natural gas, as well as automotive diesel fuel, which it has been using since its commissioning in 2004. The work, which started in January of this year, was completed on April 26, on time and within budget, at a cost of US$22.7 million or J$2.7 billion.

The arrival of liquefied natural gas, which is being undertaken by US-based New Fortress Energy, is expected by August of this year, at which point the newly converted Bogue Power Plant will begin to use the more environmentally- friendly fuel. The multimillion-dollar project will add significantly to the country’s energy diversity, fuel security, flexible generation, and production of clean energy.

Senior Vice-President of Generation Joseph Williams notes: “This is just the first phase of a deepening fuel diversification process which is taking place at JPS. We are excited to be a leader of this revolutionary move, which will not only see a more diverse energy landscape, but also possibilities for the commercial and transportation sectors of our country.”

The Bogue Combined Cycle Power Plant produces 120MW of the country’s average daily use of over 600MW of electricity.

The Observer

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Bogue Plant Conversion To Wrap Up Next Week

May 6, 2016 Webmaster

The JPS power station at Bogue, Montego Bay.

The Jamaica Public Service Company (JPS) said it expects to complete the conversion and upgrade of the Bogue combined-cycle power plant in Montego Bay, St James, within a week.

The US$22-million ($2.5-billion) project kicked off in January and, when completed, it will be able to operate on either liquefied natural gas (LNG) or its current fuel source, automotive diesel oil.

JPS said it will be buying natural gas under a long-term supply agreement from Fortress New Energy and expect to start receiving the product within the next four to six months.

JPS indicated that Bogue would be ready by the end of the second week in May in an email to the Financial Gleaner.

The company said New Fortress “is responsible for all activities associated with delivering the LNG to the port in Montego Bay, storing the LNG in tanks, regasifying the LNG and delivering it by pipeline to our power plant at Bogue”.

The project to convert the Bogue power plant, which is being undertaken by General Electric, kicked off on January 11 this year.

The work involves removal of a gas turbine and heat recovery steam generator from service, which was expected to clear the way for General Electric to start installing equipment.

JPS said the project would add significantly to the country’s energy diversity, fuel security, flexible generation and production of clean energy.

New Fortress Energy began developing its terminal and pipeline at the Montego Freeport at the end of last year, but JPS has no stake in that project.

mcpherse.thompson@gleanerjm.com

The Gleaner

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Delay as American LNG now sees 2017 start-up of export project

April 13, 2016 Webmaster

The JPS power plant in Old Harbour

In an update last week on the US Department of Energy’s (DOE) website American LNG— associate company of New Fortress Energy – said there were likely to be delays at its planned US$250-million onshore LNG export facility at Titusville, Florida. Operations will likely begin in 2017, not in April 2016 as projected before.

American LNG is controlled by Fortress Equity Partners, which is also the parent of New Fortress Energy.

New Fortress Energy won out of a field of eight bidders to provide a long-term natural gas solution for JPS power plants, starting with Bogue in Montego Bay.

In March this year, New Fortress also secured the contract to supply gas to the planned Jamaica Public Service Company (JPSco) Ltd 190MW power plant in Old Harbour, St Catherine.

American LNG, on March 7 committed to supply New Energy with up to 2.26 Bcf/year (billion cubic feet per year).

Overall, American LNG received approval in 2015 to export up to 600,000 mt/year of LNG (approximately 30.2 Bcf/year regasified) in ISO containers to countries with which the US has free-trade agreements.

Now it said that developments at its Titusville facility indicated a likely commercial operation date in 2017 instead of April 2016.

Efforts by the Jamaica Observer to find out from New Fortress how this would affect plans for Bogue were not answered up to press time.

New Fortress last year signed the supply accord with JPSCo to provide LNG for the power company’s 120-MW Bogue power plant at Montego Bay. To this has been added Old Harbour.

The 190MW gas-fired plant is intended to replace 292 megawatts of Heavy Fuel Oil Power Plants in Old Harbour and Hunts Bay which are being phased out.

American LNG told the Department of Energy that it is now producing LNG from its Hialeah facility near Miami from which the first export of LNG occurred February 5.

Natural gas for the facility is supplied by Peninsula Energy Services Co to an affiliate of American LNG.

The project has approval to export LNG in ISO containers to non-free trade agreement nations.

In March, LNG World news online reported that American LNG made the first export from the facility on February 5, 2016.

The Jamaica Observer

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